Artificial intelligence (AI) has been the most prominent investing theme of the last couple of years. And while the biggest beneficiary has been Nvidia, that’s not a stock I want to buy at today’s prices.
The same goes for Meta Platforms and Advanced Micro Devices. But I do have a stock on my investing radar that I think is set to benefit from the rise of AI and looks attractive at today’s prices.
Apple
The stock in question is Apple (NASDAQ:AAPL). Warren Buffett might claim to not know anything about AI, but the largest investment in the Berkshire Hathaway stock portfolio does.
Exactly what the company is doing with artificial intelligence is a little opaque. At the shareholder meeting last month, investors voted against a motion asking the firm to disclose its use of AI.
As an Apple shareholder, I can’t tell you how pleased I am that the proposal failed. I don’t like the idea of the company telling its rivals what it’s up to before it feels the time is right.
CEO Tim Cook promised more detail about AI features later this year. That indicates there’s already work going on and I’ll look forward to seeing what emerges – but not before it’s good and ready.
Size
So far, in the development of AI, the companies that have been the most significant winners have all had one thing in common. They’re all big.
Apple certainly fits the bill here. With the firm generating $100bn in free cash per year, the business has a lot of resources to put behind its AI ambitions (whatever they might be).
In fact, the resources Apple is willing to put behind artificial intelligence just increased. The company is moving engineers from its aborted autonomous car project to work on AI development.
Apple’s resources and technical knowledge means it has as good a chance of being successful as anyone in this area, in my view. And I think the stock looks like decent value at the moment.
Falling share price
While other AI stocks have been surging higher, the Apple share price has been falling. The stock is now down 15% from its 52-week high.
There are a couple of reasons for this. One is a fine from the EU over anticompetitive practices and another is iPhone sales in China declining by 24% during the first six weeks of 2024.
Both of these are potentially serious issues. The EU’s imposed reforms could affect Apple’s high-margin services revenue and China is a country where the company generates a lot of revenue.
In my view, though, there’s nothing here that couldn’t be offset by an impressive AI announcement. If the firm has something in the pipeline, this could help reinvigorate sales across the company.
A buying opportunity?
Over the last five years, the Apple share price has been through several double-digit declines. And every time the underlying business has shown its resilience.
Figuring out which companies are going to be the biggest winners in the AI revolution is tricky. But the stock I’m looking to buy for my portfolio in this area is Apple.
